Chattel Mortgage

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Chattel Mortgage
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Key features:

  • Borrow from $5,000 to $500,000

  • Fixed or variable interest rates

  • Repayments to suit your budget

  • Terms from 1 month to 5 years

  • Secured & unsecured options

Who is eligible?

  • Own a business and have an ABN

  • Business is GST-registered

  • Permanent Citizenship or Residency

  • Minimum business-operating time of six months

  • Can provide business bank statements

Learn more about a chattel mortgage

What is a chattel mortgage?

A chattel mortgage is a type of finance used by sole traders and businesses predominantly for the purchase of a vehicle, often due to the significant financial advantages it offers over a standard car loan.

To qualify, the vehicle must be used at least 51% of the time for business.

Chattel mortgages are a fixed-term finance contract with a fixed interest rate, most similar to secured car loans but for business customers.

This means the vehicle or vehicles you purchase will still act as security for the loan, but your business can immediately take advantage of the tax benefits of ownership.

If you are approved:

  • A lender will provide the funding needed to purchase the vehicle.

  • You will purchase the vehicle and take full ownership and responsibility.

  • You will make regular repayments to the lender for a fixed period of time.

  • The lender will register a mortgage over the asset.

Chattel mortgages are required to be registered similar to how a lender secures a home loan by registering the mortgage on a property.

Under this arrangement, you or your business will own the vehicle and assume full responsibility for it as an asset.

Chattel mortgage tax advantages

If your business is registered for GST on a cash basis — i.e. it records business income and expenses as and when they occur — it can claim the GST on the initial purchase price of the vehicle as an input tax credit on the first Business Activity Statement (BAS) following the establishment of the chattel mortgage. If you’re taking out a chattel mortgage:

  • The vehicle becomes an asset on the business’s balance sheet

  • You can claim the initial purchase-price GST back on your next BAS

  • You can claim depreciation on the vehicle in your tax return

  • A balloon payment can help reduce your repayment amounts and maintain business cash flow

  • All interest is tax deductible

In the case of depreciation, there is a maximum amount for vehicles, which is set each year by the Australian Tax Office.

The cost limit on vehicles was $57,581 for both GST and depreciation during the 2019-2020 tax year. The maximum amount of GST claimable during that year was 1/11th of the cost limit — $5,234.00.

The cost limit on vehicles is $59,136 for the 2020–2021 financial year for both GST and depreciation. The maximum amount of GST claimable is 1/11th of the cost limit — currently $5,376.00.

Chattel Mortgage Vehicle Price versus Claimable GST Table

Vehicle One
Vehicle Two
Vehicle Three
Purchase Price
Claimable GST
Vehicle below cost limit, full GST on the purchase price can be claimed
Vehicle is above the cost limit, only $5,234 of GST can be claimed
Vehicle is above the cost limit, only $5,234 of GST can be claimed

You will also be responsible for the vehicle’s operating expenses for the duration of your chattel mortgage term, including:

  • Registration

  • Servicing costs

  • Insurance

  • Replacement tyres

  • Repairs

As the vehicle is a business asset, you could claim a tax deduction for the above operating expenses. If the vehicle is used for both business and private use, however, you will need to assess the percentage that you are claiming as business use.

Self-employed (sole trader) chattel mortgage

For sole traders, a chattel mortgage can provide significant benefits not available under most other forms of car finance.

As the vehicle is being used largely for business purposes, you may be able to claim some or all of the interest and depreciation costs as tax deductions as well.

Common Australian Trades for a Chattel Mortgage

HVAC technicians
Mobile Mechanics
Pool Servicing

Most Common Vehicles Purchased With Chattel Mortgage

Work Vans
Work Utes
Delivery Vans
Trucks and Trailers

Chattel mortgages are commonly used by companies looking to purchase heavy machinery — such as transport truck and trailer combos, delivery trucks, excavation machinery, and other mining equipment.

Vehicle finance brokers operate all across Australia, and can help you compare the best available options for chattel mortgage.

They may often charge a small fee for their services, but you can find a broker to help you choose and apply for a chattel mortgage anywhere in Australia — Sydney, Perth, Adelaide, Brisbane, Newcastle, Melbourne, Canberra, or anywhere else in Australia you may be located.

Chattel mortgage deposits and balloon payments

Deposits and trade-ins

Although you won’t be required to put down a deposit in most cases — and lenders will generally finance 100% of the asset price through a chattel mortgage — you can certainly place down a deposit to lower your monthly repayments if you wish to.

If you have an existing vehicle you will be trading in, you can use the trade value of your old vehicle to purchase the new vehicle, which will also reduce the amount borrowed and, therefore, your monthly payments.

Chattel mortgage balloon payments

Balloon or ‘residual’ amounts are essentially lump-sum repayments due at the end of the loan term.

Chattel mortgages can be set up to include a balloon amount, which results in lower scheduled repayments at the cost of a higher final payment.

This is often the case when a business wants to conserve cash flow at the time of taking on the chattel mortgage.

Otherwise, the business may choose to pay off the vehicle without a balloon and simply own the vehicle once the loan is repaid.

Chattel Mortgage Balloon Payment Calculation Table

5 years
5 years

Important: This is a hypothetical calculation as an illustration of how balloon payments affect monthly repayment amounts.

Options at the end of the term

At the end of a chattel mortgage, you or your business will need to pay the balloon payment — if there is one — and you will have a few options:

  • Refinance the balloon amount and retain the vehicle.

  • Repay the balloon with funds at hand, and retain or sell the vehicle independently.

  • Trade the vehicle in and purchase another with a new finance agreement, repaying the balloon amount in the process (generally using the proceeds from the trade-in).

How to qualify and apply icon

How to qualify and apply

Anyone wishing to finance a vehicle predominantly for business purposes can apply — the vehicle must be used within the business at least 51% of the time.

This makes them ideal for tradies and other business owners who want to finance a vehicle primarily for work, but still drive it around on the weekend as well.

As a chattel mortgage is specifically designed for businesses, you can apply if you’re:

  • A sole trader — i.e. tradie — financing a vehicle predominantly for business use

  • Self-employed and an ABN holder

  • Financing a company car or fleet as a business asset

  • Financing industrial vehicles or machinery for business use.

Lender approval criteria will vary, though provided you can supply the appropriate documents and have a good credit history, you’ll likely be approved.

If you’re buying a vehicle to the value of $150,000, most lenders will offer a chattel mortgage if you:

  • Have been in business 12 months; and

  • Have an ABN; and

  • Are registered for GST; and

  • Have a clean credit history

  • Are currently renting and can provide a 20% deposit; or

  • Own a home.

If you’re looking to finance a vehicle greater than $150,000, or have been in business less than 12 months, you may still be able to apply for a chattel mortgage.

If this is the case, you’ll need to provide additional documentation to the lender so they can better assess your application. Here are some tips to improve your chances of getting approved:

  • Demonstrate the ability to service your equipment loan or lease.

  • Understand the lender's approval criteria

  • Have an ABN

  • Be registered for GST

  • Have an acceptable credit rating

  • Have a minimum amount of existing debt

You'll also need to supply all your supporting documents, such as:

  • Proof of identity

  • Financial records (provided by your accountant)

  • Profit and Loss Statements

  • Balance Sheet

  • Details of the asset you wish to purchase

  • Business bank statements.

  • Rates notice (if you own a home).

  • Rental agreement (if you are renting).

Summary icon


Chattel mortgages in Australia offer greater benefits for businesses than many other kinds of finance, and are suitable for all kinds of businesses wishing to purchase company vehicles or machinery.

In summary:

  • Allows a business to finance a vehicle if it is used for business purposes 51% of the time.

  • Uses the financed vehicle as security.

  • Allows the business to benefit from ownership of the vehicle immediately.

  • May include a balloon payment to lower monthly repayment costs.

  • Is generally set between 2 - 5 years.

  • Generally has lower rates and fees than other forms of vehicle finance.

  • May include early repayment or termination fees.

  • Offers GST, depreciation, and tax-deduction benefits on a vehicle.

How much do you need for your business?

Here are the most popular chattel mortgage questions people are asking:

Can I get a chattel mortgage if I have bad credit?

Yes, provided you can display your ability to repay the loan amount. As a chattel mortgage uses the vehicle you wish to finance as security, lenders are more inclined to offer approval to someone with bad credit than they are an unsecured business loan.

Can I finance used vehicles with a chattel mortgage?

You can use a chattel mortgage to finance used cars or vehicles for your business. However, be aware that lenders may charge a higher interest rate if you are planning to buy used cars or vehicles, due to the added risk and lower value of the used asset.

What are the disadvantages of a chattel mortgage?

There are three main disadvantages of a Chattel Mortgage:

  • All monthly instalments (and the balloon payment) are not tax-deductible

  • A business is paying interest on a vehicle instead of owning it outright

  • For small businesses in particular, there is experienced accounting work required to claim GST

What type of fees can I expect to pay on a chattel mortgage?

Chattel mortgages are often free of some of the types of fees and charges often associated with consumer loans and other finance agreements — such as account-keeping fees and other charges. Make sure you understand any fees before signing an agreement with a lender.